EUR.MONEY: The German Twin Crisis of 1931

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                ABSTRACTS IN ECONOMIC HISTORY
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Name: Isabel Goedde
Email: isabel@econ.uni-mannheim.de
Institution: University of Mannheim

Co-author: none

Title: The German Twin Crisis of 1931

Internet Address of abstracted work:
http://www.vwl.uni-mannheim.de/hellwig/isabel/twin.pdf

By mail:
University of Mannheim
Department of Economics
68131 Mannheim
Germany

Phone: (+49)621 181 1835
Fax: (+49)621 181 1837

Language: English

Abstract:
The simultaneous occurrence of a general banking panic and the
abandonment of the gold standard was one striking feature of the
German financial crisis of 1931. In this paper, I analyze the causal
links between the two phenomena by comparing the evolution of
different bank groups in the years preceding the crisis and during
the crisis itself. My findings suggest that the origins of the
banking and currency problems initially were largely independent: The
currency turmoil seems to have been caused by political shocks, while
the problems in the banking sector were the result of excessive
risk-taking on the part of certain banks due to an implicit deposit
insurance. The banking and currency problems became increasingly
intertwined as the run on the currency and the withdrawals at German
banks were reinforcing each other. In July 1931, the Reichsbank faced
a dilemma as it could not at the same time defend the fixed peg and
serve as a lender of last resort to the banking system. At that
point, neither the banking crisis nor the factual abandonment of the
gold standard could be avoided. (JEL: G2, N2)

Bibliography: Goedde, Isabel "The German Twin Crisis of 1931."
Working paper, University of Mannheim, 2000.

Subject: H
Geographical Area: 4
Country/Region: Germany
Time Period: 8

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